HUMAN RESOURCES ADDING VALUE TO THE BUSINESS

Transcription

1 Master's Thesis Master s Degree programme in International Business Management 2015 Sanna Nurmi HUMAN RESOURCES ADDING VALUE TO THE BUSINESS Case Cygate

2 2 MASTER'S THESIS ABSTRACT TURKU UNIVERSITY OF APPLIED SCIENCES Master s Degree Programme in International Business Management 2015 Total number of pages 74 Mervi Varhelahti, Laura Heinonen Sanna Nurmi HUMAN RESOURCES ADDING VALUE TO THE BUSINESS- CASE CYGATE This thesis is based on research, which aimed to survey the role and work of human resources (HR) in a company called Cygate and was carried out as a deepened view to the previous study. The purpose of this study is to gain the respondents' (both managers and HR) perception of how HR is functioning today and the possible needs for development from a strategic point of view. The main research area is: What are the participant s view of the current HR work and potential needs of development of achieving the level of strategic human resource management? This area is analyzed in sections through five research questions. This thesis will be supported by a theoretical framework, which is based on strategic HR. The theoretical framework consists of various themes and views, such as strategy, human resource management (HRM), strategic human resource management (SHRM) and the four roles of HR. Main focus of this study is in the company part and the survey and there is also a view on the cultural aspects of Finnish and Swedish ways of working. The study was conducted as a quantitative survey for the managers and as a qualitative interview for the HR personnel. With the help of the survey it was clarified whether the qualification met the objectives, and if there were some potential development proposal. The results of the questionnaire and interview were analyzed with reference to the theoretical framework Potential development proposals are conducted in the last chapter. The improvement required consists of mostly higher level of business knowledge in order to support the business in more efficient way. Most of the responding managers emphasized the importance of HR understanding the business and business strategies. HR sees the existing gap between being operational and becoming more strategic partner although it is more obvious to HR that most of the operational tasks are connected to strategy. KEYWORDS: Human resource management (HRM), strategic human resource management (SHRM), human resources (HR), strategy, business strategy, business partner, development

3 3 OPINNÄYTETYÖ (YAMK) TIIVISTELMÄ TURUN AMMATTIKORKEAKOULU Master s Degree Programme in International Business Management 2015 Sivumäärä 74 Mervi Varhelahti, Laura Heinonen Sanna Nurmi HUMAN RESOURCES ADDING VALUE TO THE BUSINESS- CASE CYGATE Tämän opinnäytetyön pohjana on Human Resources (HR) työhön ja roolin kohdistuva tutkimus, joka suoritettiin yrityksessä nimeltä Cygate ja työ on myös tutkimuksen syventävä jatko-osa. Tämän tutkimuksen tarkoitus on saada kuva Cygaten esimiesten ja HR osaston näkemyksestä siihen, miten HR toimii ja mitä kehitysmahdollisuuksia löytyy strategiselta näkökannalta ottaen. Päätutkimusalue on osanottajien näkemys nykyisen HR työhön ja mahdollisiin kehitystarpeisiin strategisen HR tason saavuttamiseksi. Tätä päätutkimusaluetta tutkitaan viiden eri kysymysalueen kautta koko opinnäytetyön läpi. Opinnäytetyön tukena ovat teoreettiset puitteet, joiden lähtökohtana on strateginen HR työ. Teoriaosa koostuu erilaisista aiheista ja näkemyksistä, kuten strategia, HR johtaminen, strateginen HR johtaminen ja neljä HR roolia. Pääalueena tässä opinnäytetyössä on itse yritysosio ja tutkimisaineisto ja työ sisältää myös osion, missä tarkastellaan suomalaiseen ja ruotsalaiseen työkulttuureihin liittyviä näkökulmia. Työ suoritettiin kvantitatiivisena kyselynä Cygaten esimiehille ja kvalitatiivisena haastatteluna HR henkilökunnalle. Kyselyn avulla selvitettiin, josko edellytys ja tavoitteet kohtaavat ja myös mahdollisia kehitysehdotuksia löytyy. Kyselylomakkeen sekä haastatteluiden tulokset analysoitiin teorettisen kehyksen puitteissa. Mahdolliset kehitysehdotukset on esitetty viimeisessä osiossa. Tarvittava parannus koostuu lähinnä liiketoiminnan korkeamman tason ymmärtämisestä, jotta sitä voitaisin tuke parhaalla tavalla. Suurin osa vastanneista esimiehistä piti tärkeänä HR osaston liiketalouden tuntemusta ja strategista ymmärrystä. HR ymmärtää operatiivisen ja strategisen aseman välisen juilun, aikkakin se on selkeämpää HR osastolle kuin esimiehille, miten operatiiviset toimenpitee ovat osa strategiaa. ASIASANAT: Human resource management (HRM), strategic human resource management (SHRM), human resources (HR), strategia, liiketoimintastrategia, liiketoimintapartneri, kehitys

4 4 CONTENT 1 INTRODUCTION Project plan for the thesis Research questions Previous study 10 2 LITERATURE REVIEW The concept of strategy Strategy and HRM Matching HRM to organizational strategy Strategic human resource management The emergence of SHRM SHRM: What does it mean in practise? Organizational change and its impact on business management and HR management The four roles of HR Finnish society in the context of expertise-based competitive advantage 26 3 CASE CYGATE Cygate the company The journey of Cygate Cygate s HR department Cultural differences between Finland and Sweden in the context of companie s competencies and well-being from strategic HR point of view 33 4 OBJECTIVES AND GOALS Objectives of the thesis Goals 35 5 DATA COLLECTION The survey- questionnaire Section I: Personal information Section II: HR s role Section III: Professional HR competencies The survey- interview 49

5 5 5.3 Interview questions Interview answers 50 6 ANALYZING THE RESULTS 55 7 DEVELOPMENT PROPOSALS 61 REFERENCES 64 APPENDICES Appendix 1. Questionnaire managers Appendix 2. Interview questions HR PICTURES Picture 1. Study plan (Holmgren (2013) TeliaSonera s HR study for Cygate). 9 Picture 2. Traditional HR model vs. Future HR model (Holmgren (2013) TeliaSonera s HR study for Cygate). 10 Picture 3. The four HR roles by Ulrich. 24 Picture 4. Cygate s offer to the customers (Marketing department Cygate 2012). 28 Picture 5. HR organization in Cygate. 30 Picture 6. Cygate s organizational chart. 31 TABLES Table 1. Thesis project plan. 7

6 6 1 INTRODUCTION This thesis is a study of the extent to which the expectations of middle and senior managers in my current company, Cygate is consistent with the existing human resources management (HRM) from a strategic point of view. This thesis is also a complementary study that has its origin of interest in an analysis done regarding the HR department s work load and the consistency of the work done by HR. The analysis also included a smaller scale view on HR s work by board of leaders. The analysis showed that HR worked extra hours covering a half-time job and this resulted in employing one more HR Manager in the current group. It also measured the thoughts of top leader s view on HR in different HR related tasks. It became clear that HR is not seen as very top strategic player in the company, which actually became the starting point for the need of this study. Human resources have for years been fighting for their strategic position in Cygate. In theory, HR s role has become more of a business partner than just an operative administrator, which was the case for many years ago. That is not fully implemented view in Cygate. In my opinion, HR should have at least as important role in adding value to the business as all the other business areas in companies. The strategic role of HR is still not understood and accepted in many companies and a company called Cygate is used as an example in this thesis. Cygate has seen the value of HR in many ways, but mostly from the operational point of view. There are some questions yet to find out answers to when it comes to achieving the position of a strategic business partner for HR in Cygate. How to define HR s position in the company? Who owns the processes, managers or HR? What are the expectations from both sides? Is HR part of the business

7 7 strategy planning? Which role does HR want to achieve? How to make the managers aware of the importance of strategic HR work? I hope to find answers to some of these questions throughout the study. It is very common that HR processes are seen important for HR to have and not always as something that actually adds value to the company. There is a constant struggle with defining, explaining and justifying HR processes to managers. Cygate is no exception in this. There has been understanding for the need of some of the processes, such as recruitment, performance management and salary review, but they are often seen as time-consuming, too controlled and not very proactive processes from the manager s point of view. There is a long road ahead for HR representatives in Cygate by trying to convince that HR both has the qualities, competencies and knowledge to help the business gain their goals. This struggle is ongoing on daily basis and the fact that all HR are women in very male dominated field does not make the road less rocky, so to say. It is hard to diminish the operational and administrative role, when the company has not have HR services function. The approach in this thesis is from theory to practice, starting with presenting theoretical approaches to HR s role and strategic partnership to the business. Then some examples of how can they be used in practice. The second part will go through the current situation in Cygate first from the company s point of view and finally through HR departments history to today. The third part includes the conducted qualitative and quantitative research from plan to results. Finally, the last part is analysis of the results and development suggestions.

8 8 1.1 Project plan for the thesis The thesis was conducted for my current employer company called Cygate, where I work as HR manager since This thesis was done parallel to full-time work and required quite a huge effort to be conducted, both time wise and quality wise. The plan was to follow a strict timeline. Project plan was set in the beginning of 2014 and in the first outcast it was to be conducted within four months. This soon became impossible due to some radical changes in the company that put the focus on work instead of thesis. The new timeline was set and the goal was to be done by the end of Table 1. Thesis project plan. Project part Action Due date Thesis suggestion and plan Do a thesis plan with subject suggestion and present it both in school and work Start theory part Reading and writing theory part to the thesis Start company related part Writing the company based part in thesis Start creating questionnaire and interviews Create questions to the questionnaire and interviews Conduct questionnaire and interviews Give questionnaires to managers and interview HR Analysis Analyze the results and write these in thesis Present thesis Present the thesis both In school and at work

9 9 1.2 Research questions Many studies have found a positive relation between strategic HRM practices and firm performance. Finding the way for synergy effect between business strategy and HR strategy is one of the goas for this thesis together with finding answers to the research questions below. The staring point is how the current situation looks like in the studied company, Cygate. The research questions are based on following: What does it mean to be strategic HR? Is HR seen as more operational or strategic function in the company today both by managers and HR? Is there a need to be more strategic? What are the most important tools for HR to become a business partner or to retain the role? How is HR strategy aligned with the company s business strategy? With the help of these questions the thesis includes firstly the current situation in the company. Secondly, this thesis studies the manager s and HR s own view on how strategic they need to be in order to add value to the company. Thirdly, there are development proposals to help HR to gain/retain the wanted position. It is not unusual that the view on HR differs quite a lot depending on which part of the company is answering. There is different amount of interaction between HR and rest of the organization at sometimes it is hard for parts of the organization to understand what HR work actually means. The research questions are helping to find that out.

10 Previous study This thesis has a connection to a study and analysis performed by Ulrika Holmgren (TeliaSonera) regarding Cygate s HR department. The goal of the study was to analyze the tasks and roles of HR. The purpose of the study was also to analyze if there was something in the model that could be done more effectively and if there was need for one more HR Manager. The analysis also showed how strategic role HR had both according to facts and even opinions of the board. Picture 1. Study plan (Holmgren (2013) TeliaSonera s HR study for Cygate). The study was conducted within two month time frame. It was conducted by interviews, questionnaires, theories and lots of analysis. The results were presented to the board and even both HR in Cygate and in TeliaSonera. The analysis was very thorough and included both the actual time spent on different HR tasks and how important these different tasks are according to the high level leaders. Also the dimension how well HR is doing the tasks was in the analysis. All and all, the study was very comprehensive with many different angles to give as accurate result as possible.

11 11 The results gave very good input and ground for development proposal that was also part of the analysis. Core of the proposal was that managers should take more responsibility in parts of HR related issues and that HR lacked resources. The conclusions of the study are presented in short form below. Time and process study -> Cygate traditional HR model Major part of tasks related to HR is initiated and performed by HR The managers take very little part in HR issues Managers/employees are the owner of the order and HR is the delivery function This existing model makes HR an administrative and supportive function Cygate s HR persons are working overtime that is comparable to a half-time employment Picture 2. Traditional HR model vs. Future HR model (Holmgren (2013) TeliaSonera s HR study for Cygate).

12 12 The study resulted in some different ways of working and even in employment of one more HR manager in the group. It was seen necesseray in order to be able to work with lifiting the administrative role to more strategic level and to be able to be more proactive in all HR issues. Though, it is a fact that the study took quite a long time and the decision of employment took almost a year so Cygate has become larger during that time and the work of becoming more strategic and proactive has actually taken a step back. It is obvious that employing HR personnel is all the time behind the needs timewise. The situation is very fragile and the team has no margins in some one being abscent for example. The work load is quite heavy if one or more members of the HR team are not at work for some reason. The study gave good ground for the actions mentioned above and even for the board of leaders to understand what HR is actually doing and spending their time on. After the results were presented to the board it resulted in higher understanding for HR tasks and the lack of time and resources. So all and all positive effects. From strategic human resource management point of view, there should be stydies like this in other companies as well. It was so obvious after the analysis, wat HR was doing, wasn t doing, should be doing, shouldn t be oing and what the manager s role was and should be when it comes to HR related issues. Most importantly HR should define their wanted position befre conducting this kind of study. That I feel tha we didn t quite do in our case, but this thesis will help with that aspect.

13 13 2 LITERATURE REVIEW This chapter reviews the literature from the two approaches that are central to this study: strategy and human resource management (HRM). Strategy as a concept is interesting topic in itself and when it is combined to HRM approach it becomes closely linked to the whole essence of this study. The chapter begins with the concept of strategy in business. What does it really mean and how it is described in literature? The second part of this chapter will concentrate on HRM and how it is seen in strategic context. 2.1 The concept of strategy In management studies, the term strategy has originally been adopted as a metaphor. The word strategy originated in studies of warfare. (Lundy & Cowling 1996, 16.) Lundy and Cowling (1996, 17) also identify five elements in strategy: Leading Positioning Deploying resources Securing competitive advantage Achieving success in the prevailing environment. The word strategy actually comes from the Greek language and refers to a leader or a general.

14 14 On the internet, the results of searching an explanation to strategy gives various alternatives such as: 1. A method or a plan is chosen to bring about a desired future, such as achievement of a goal or solution to a problem. 2. The art and science of planning and marshalling resources for their most efficient and effective use. The term is derived from the Greek word for generalship or leading an army ( Linstead et al. s (2004, ) rationalist model of strategic management has its main assumption in managers having access to all the relevant information necessary to make informed long-term decisions about their organization and possess the power to implement their decisions. Strategy is therefore an objective planning process. Their reconfigurations model acknowledges that rational decision-making is actually very often bounded because managers do not have all the information they need to make decisions. The postmodern approach described by Linstead et al. (2004, ) describes strategy as an attempt to direct and interpret organizational discourse. In this perspective strategy does not represent a rational decision-making process at all. It is more of an attempt to create descriptions that will support existing power relations within an organization. Linstead et al. (2004, ) capture an issue that is central to this study, which is the difference between the rational concept of strategy that informs most prescriptive writing on the subject and the reconfigurations and postmodern approaches that are more and more underpinning the contemporary strategic management scholarship.

15 15 The rationalist approach has dominated strategic discussions and contains the majority of the key elements that many managers would consider as universally applicable ways to formulate strategy. Prescriptive writing about strategic management is based on a rational model that indicates that managers have information and power. On the other hand, contemporary ways of thinking suggest that this frame is misleading and that in fact managers are only some of many actors engaged in a continuous process that accounts for organizational outcomes. The issue of interest for this study is the extent to which managers themselves are aware of this inconsistency between prescription and reality and the nature of their reaction. Of particular interest for the purposes of this study, is how the rational strategy affects HRM. Before considering those implications, it would be useful to explore in more detail some of the many questions that have been explored within the study of strategic management. (Lovell 2009, 32.)

16 Strategy and HRM HRM evolved from what used to be known as personnel management (Beaumont 1992, 20). A distinguishing feature of personnel management was its functional, non-strategic nature. Functions such as recruitment and training were administered independently. Influencing employee behavior, especially by increasing productivity, was regarded as a technical capability to be improved through research. (Delery & Shaw 2001, 506.) Earlier literature consists of the effects on firm performance of the way in which people were treated at work tended to be ignored, such as accounts of improved employee satisfaction in companies that practice welfare capitalism a union-avoidance measure (Kaufman 2001a, 341). Kaufman (2001b, 356) believes that the interest in strategic management since the 1980s had a dramatic impact on the development of HRM, because it emphasized the importance of treating employees not as a homogeneous input to the production process but as a resource whose quality and quantity of output was capable of deliberate manipulation. Over the last 20 years, two propositions have gained wide acceptance in the HRM literature. The first is that HRM should be managed strategically, in that HRM practices should complement an organization s overall strategy. The second is that a set of HRM practices can be described which collectively constitute SHRM.

17 Matching HRM to organizational strategy Strategy is concerned amongst other things with the allocation of an organization s resources and for most organizations employees are an essential resource. At this very basic analytical level, the connection between strategy and people is clear. However, people are not resources that can be acquired, modified and disposed of in the same way as other elements in the production of goods and services. Organizations can employ people but the amount and quality of the work that those people do is not something that can be controlled by management. Consequently, managers have to implement practices that produce the desired behavior on the part of employees. (Lovell 2009, ) What might be called the elementary perspective on HRM can be summarized as follows. Firstly, employees are important assets in which enterprises typically invest considerable amount of time and money. Secondly, enterprises whose employees perform poorly can expect to suffer a competitive disadvantage Thirdly, it follows that managers should pay attention to managing HR by learning how to do it effectively, instead of acting as if employees were joined to the enterprise by nothing more than an economic or a legal relationship. In this context, effectively means learning state of the art HRM techniques: good practice which all employers should follow irrespective of business circumstances (Purcell & Ahlstrand 1994, 63.) If employees are managed using the recommended HRM practices, they will be highly satisfied with their jobs, strongly motivated, loyal and less likely to leave, more attentive to timekeeping, and so on. Sometimes an explicit link will be drawn between these outcomes and enterprise performance. Sometimes the connection will be unstated, presumably because it is regarded as self-evident. (Delery & Shaw 2001, 174.)

18 Strategic human resource management Strategic human resource management (SHRM) is a comparatively recent concept in both the theory and practice of management. Labor economics contributed the perspective of human capital and the desirability of maximizing employee productivity, while organizational behavior studies of the sources of organizational performance have incrementally absorbed the psychologies of individual motivation and group processes and their relationships with the various conceptions of organizational strategy. That is why it is not very surprising that representatives of different disciplines have examined SHRM through very different lenses. (Lovell 2009, 30.) The emergence of SHRM The human resource function has evolved over the years from the labor officer, to the personnel officer, personnel manager and the human resource manager of today. The change in terminology also suggests a change in the objectives and boundaries of the function. The dynamic and competitive business environment resulting from globalization has led a new focus on how human resource should be organized and managed. This has led to the emergence and increase in the use of the term strategic human resource management (SHRM). There has now been a visible convergence between HRM and strategy. (Shaikh 2011, 2.) Over recent years, most HRM scholars have advocated a particular strategic concept of HRM. The strategic element consists firstly of co-ordinating each separate HRM activity recruitment, selection, rewards management, training and so on so that they complement each other, thus maximizing the favorable employee behavioral outcomes mentioned earlier. (Becker & Huselid 1998, 55.)

19 19 This is referred to as internal fit. The second strategic requirement is to give HRM a place in overall enterprise management, so that other management decisions take account of HR implications. Over time, these propositions have gained wide acceptance as SHRM. (Lovell 2009, 35.) A rational approach to strategy underpins SHRM, with its assumptions that strategy is something developed and implemented by a small group of senior managers. In the SHRM model, an HR manager is part of that senior management group. Employees should be managed in ways that match outcomes to the objectives driving corporate and business strategy. (Becker & Huselid 1998, 55.) According to Schuler et al. (2001, 121): the four main tasks of HR are: Managing employee assignments and opportunities Managing employee competencies Managing employee behaviors Managing employee motivation Beer & Eisenstat (2000, 29) assert that companies have long known that, to be competitive, they must develop a good strategy and then realign structure, systems, leadership behavior, HR policies, culture, values and management processes. According to this enterprises need to develop and implement a set of procedures that best accommodate broader strategic goals (Becker & Huselid 1998, 58).

20 SHRM: What does it mean in practice? Personnel management has evolved into human resource management (HRM) and more recently into strategic HRM (SHRM). This transformation is easily seen in literature but much less is known about the extent to which it has been used in management practices in organizations. It is not very measurable and that is why there are no hard facts. Strategic human resource management means that HR is business partner with the various business groups to provide guidance, consultation, and direction regarding employee relations, performance management, development, staffing needs, and organizational changes. It is also important that HR develop strong relationships across all levels of the organization and act as a trusted and valued business partner that ensures the integration of HR programs with business strategies and ensure compliance with local laws. Organizations that can effectively influence the behaviors and motivation of their employees through human resource management systems will be able to increase their performance and viability (Huselid 1995, 635). The role of human resource management in gaining competitive advantage has been discussed in the western literature since the early eighties. Many studies have been conducted regarding how companies can gain a sustainable competitive advantage through their human resources and human resource management practices.

21 21 The studies have empirically proved the relationship between strategic human resource management and firm performance. There has been a positive relationship between HRM practices and firm financial performance. As long as there is a financial gaining as the ultimate goal, there will be interest in developing strategic human resource management in companies. Researchers have been addressing the link between HRM practices and competitive advantage. They have argued that human resource management practices can contribute to competitive advantage in so far as they elicit and reinforce the set of role behavior that results in lowering costs, enhancing product differentiation or both. This perspective has contributed enormously to the theory, research and practice in the field of strategic HRM. Since 1990's there has been an increased focus on the strategic role of HRM. The strategic approach to human resource management refers to the human resource practices and strategic objectives of the firm. This view has become more significant in today's knowledge economy that depends upon the skill and knowledge of the workforce. From being a routine and reactive function the HR function has evolved to being proactive and strategic.

22 Organizational change and its impact on business management and HR management Today s organization is increasingly an expertise- based organization, and going towards being a service organization from a manufacturing one. Both of these trends place special emphasis on people, their competencies, and the competencies of the entire organization. Organizations have started to develop operating models and practices to meet toughening competence demands that need to be developed at an ever faster pace. In the academic world, researchers have increasingly started to focus on theories and models that address corporate competence and human resource management and development. (Laakso- Manninen & Viitala 2007, 6.) According to Laakso-Manninen (2007, 8) there is a paradigm shift in business management. The whole organizational environment has changed and become both more demanding and more flexible. People are no longer expected to stay for their entire life in the same work place and the demand for faster and more complex competence development, both when it comes to employees and leaders, is a fact. One is expected to gain higher level of competence in a shorter time than before. This puts a lot of pressure both to HR and to the business itself to manage this type of expectations. HR needs also to keep up with the demands regarding its own development. Depending on the industry, competence development needs to be at least one step ahead and continuously adapted to changes. Certain competencies become insufficient in quite a fast pace, especially in the IT-field. Only a few years ago it became widely acknowledged, that continuous learning plays a crucial role in company success. The root competencies were recognized as: strategic competence, core ability and core capability. (Laakso- Manninen 2007, 9.)

23 23 Below, there is a description of various approaches to competence management. Research and debate on knowledge management has run closely in parallel to these approaches. In contrast to competence management, however, knowledge management is more technical in nature and addresses the question of how IT systems can support the acquisition, processing and dissemination of information within companies. (Laakso- Manninen 2007, 10.) Table 1. Key approaches to competence management (Laakso-Manninen 2007, 10). The new theories and approaches shown in the table above have focused on the identification and development of core competencies on the one hand, and on the development of the company knowledge base on the other. The theories and approaches have their own backgrounds and

24 24 manifest a variety of benefits. (Laakso-Manninen 2007, 10.) A key challenge faced by organizations is the question of how to integrate traditional human resource development activities with the strategic view point. This needs a changing role for human resource management. Human resource departments were in the past often accused of setting up systems isolated from the rest of the organization. To be able to integrate human resource issues with top management s vision of a company s future, the department should own a more strategic role. Human resource development is one of the most important factors contributing to future competitive advantage. (Laakso-Manninen 2007, 11.) The four roles of HR Dave Ulrich identifies four distinct roles of HR professional that may add value to a business and create sustainable competitive advantage. There is a definition of these four different roles in HR management. By fulfilling these four roles HR managers are able to act as business partners. HR professionals need to be able to adapt both strategic and operational ways of working both in short-term and long-term goal perspective. The tasks of HR have the dimensions from managing processes to managing people and the four roles of HR are defined by these two dimensions (Ulrich 2007, 46.) In understanding the four roles one needs to take three different factors into consideration. The goal of the role, the typical name and image of the role and the tasks connected to the role. (Ulrich 2007,47.) These four roles are presented in the picture below.

25 25 Picture 3. The four HR roles by Ulrich. The four roles can be explained according to following: 1. Strategic partner role, where HR helps turning strategy into results by building organizations that create value 2. Change agent role, where HR helps to make change happen fast 3. Employee champion role, where HR manages the talent or the intellectual capital within a company 4. Administrative role, where HR tries to get things to happen better, faster and cheaper Combining HR strategies and practices with the business strategy is the key in the role of becoming strategic partner. That includes understanding the business and contributing to the results of business strategies. To be able to achieve this

26 26 goal for HR to become strategic partner it is crucial that HR is involved in both strategic planning and execution. Involving HR in this way impacts the positive effects of HR in the business strategy implementation. (Ulrich 2007,48-49.) There is always some kind of strategy in all areas of business. HR professionals should be able to recognize the practices that help and support the business strategy. This recognition is known as organizational analysis, which is a process that helps finding out the strengths and weakness of the business. (Ulrich 2007,49-50.) HR is also expected to create HR strategy, which is linked to the overall business strategy. That way it is easier to define which HR processes are important and focus areas and how they actually support the organization. In most cases the operational HR actions are part of overall strategic work, but it is rarely seen that way. 2.5 Finnish society in the context of expertise-based competitive advantage The success of Finnish companies and organizations can be said to be uniquely based on the emphasis given to personnel wellbeing and development. The success of the Finnish economy has likewise been built on a strategy of excellence and highly qualified competencies within the workforce. Finnish society values education very highly. There are very few drop-outs. In this light, education standards and therefore also the competence base for companies is very good when they recruit human resources in Finland. (Laakso-Manninen 2007, 11.)

27 27 Regarding to competence management in the organizations, there can be made a number of conclusions. A HR development system that integrates a company s core competencies, knowledge base and the personal dimension typically includes the following elements: Formulation and communication of the company vision Identification of the company s core competencies, past and future Identification of current expertise Personal development discussions Performance management and scorecards Developmental dialogue on the corporate level Strategies and systems for knowledge transfer Human resource development methods. (Laakso-Manninen 2007, 14.) To be able to integrate human resource issues with top management s vision of the company s future, the HR department should have more strategic role. HR development is one of the most important factors contributing to future competitive advantage. We still need to ask how to make HR development systematic and bring it in line with the corporate vision. (Laakso-Manninen 2007, 11.)

28 28 3 CASE CYGATE This thesis is done for a company called Cygate in order to get a clearer picture of the current role of HR and the manager s expectations on HR when it comes to practicing strategic human resource management. 3.1 Cygate the company Cygate is an IT-system integrator that offers its customers Secure IT infrastructure at the forefront of technology. The core-business is networking and security. The biggest departments are sales and consulting. There ate also a lot of technicians, administrators in different forms. These areas are divided in four regions (east, middle, north and south), STAB, Business Areas, Unified Communication and Maintenance. The company is 36-years old and owned by a large scale telecom company called TeliaSonera since Cygate is divided in two countries Sweden and Finland, but both countries work independently. There are approximately 700 employees in Sweden and roughly 100 in Finland. The company has grown fast the latest years both organically and by acquisitions. This has put a lot of pressure in the HR department during the years as the amount of employees has rapidly become larger. Cygate s business model is to offer medium-sized and large companies and organizations greater efficiency and reduced risk by offering total solutions within data, video and telecommunication. The solutions are based on understanding of the business' needs, in-depth technical know-how and the best available products via partnership with the world's leading IT suppliers. Cygate works closely with our customers to develop tailor made solutions with them.

29 29 There are different areas that Cygate can provide expertise in to their customers. These areas are presented in the picture below. Picture 4. Cygate s offer to the customers (Marketing department Cygate 2012). Networking is the core business and all the other parts in the wheel complement the core. Networking is necessary in order to be able to deliver the other parts to the customers. 3.2 The journey of Cygate Cygate has been through many big changes during the years. I take into consideration the years that I have worked in Cygate ( ) and 2007 is also when TeliaSonera took the ownership of Cygate so it is a huge milestone. There has been small and big acquisitions during the years and on top of that also organic growth. This has resulted in that the company grew very rapidly. The growth has resulted in four times the amount of employees in eight years.

30 30 This has put a lot of pressure on the HR department as HR hasn t grown in the same phase. We were only two people working within HR until 2010, when the head count had already gone close to 500 people. The workload has been almost unbearable at times and there has not been much room for proactivity or strategic partnership because of the operational pressure. I think the key factor in order to keep HR important to the company has been the influence that the former HR Director has had in form of board member. HR is not seen as something that generates direct income to the company and that is why it has been a struggle to make all the business minded gentlemen to understand the importance of HR processes and the indirect monetary perspective to it. A part from all the acquisitions there has been some major changes that have impacted the company during the last year. There was a smaller scale redundancy based on competency shift in This was for the first time in the company s history with our last CEO ( ) when this has happened. Even though the owner TeliaSonera has had several redundancies it was something that people in Cygate had hard time to relate to. This unexpected process gave some negative vibes for a couple of weeks. Soon after that there was a very unexpected and fast change of CEO, which has more or less affected the whole company s culture. I would say it still does in different ways. The biggest change that is going on in Cygate at the moment is the more intense integration going on with the owner TeliaSonera. The goal is to get more synergy effects but the reality is that it takes time and there is a lot of resistance to it, mostly because people experience the integration as losing the freedom and flexibility that have been the key factors for Cygate s success. This is something that the HR department has to work with very closely to the board of leaders and the CEO in order to make the transition as smooth as possible. There will be some challenging years ahead.

31 31 Cygate has a new strategy and values, which are part of TeliaSonera s strategy work. This is part of the integration that the two companies are working with. It is one of the biggest challenges that Cygate has ahead and it can have an impact on retaining people. There has been a larger turnover in exits this year than the years before. 3.3 Cygate s HR department The HR department has grown from one person in 2005 to four people within 10 years. The HR organization includes HR Director and three HR Managers. Picture 5. HR organization in Cygate. Each HR manager has somewhat 230 employees and approximately 30 managers in their regional responsibility areas within the company. Unofficial recommendation in Sweden is approximately 150 employees per HR person. That means that Cygate HR is somewhat overloaded. That is also shown in the analysis of HR in Cygate done by TeliaSonera in 2013.

32 32 The conclusion in the analysis was that the workload per HR person was overwhelming. After the analysis there is one person more working within HR, but the company is expanding faster than HR is growing. This will be a challenge in the future when the company s goal is to be closer to 1000 employees within few years. In the picture below is the matrix organization model of Cygate presented. HR is presented in every board meeting and takes part in discussions for different regions. Picture 6. Cygate s organizational chart. Cygate s HR director has been in the company for 6 months and replaced the HR director before, who had worked for the company since The three HR managers have worked within HR for 8, 5 and 2 years. It is fairly new group and

33 33 they are trying to find mutual ways of working both within the group and outside in the company. The manager s are learning to get to know the two new members as well. 3.4 Cultural differences between Finland and Sweden in the context of companies competencies and well-being from strategic HR point of view Even though Finland and Sweden are close to each other doesn t mean that the working life is the same. First of all, Sweden and Finland still differ in hierarchy thinking in a way that managers have a higher status in Finland and in Sweden they are seen more as leaders. This also means that ways of working and employee satisfaction may reflect this difference. Based on personal experience and observation decision making in Sweden is mostly reached by consensus, which means that major part has to agree on the topic. In Finland it is more accepted that a manager makes the decision. This might affect the feeling of being a part of the decision and supporting it all the way. Silent acceptance is quite common in Finland, even though employees tend to talk about these things with each other and express their opinion about the decision, even though they might not be able to change it. In general, working-life is highly appreciated in both countries and status in the company is important, thus not as important as in e.g. Denmark. Both countries have demanding working environments and there have been historically many redundancies especially in bigger companies, such as Nokia and Volvo. That has put a little bit of fear when it comes to seeing working-life as safe. People are highly educated in both countries, possibly slightly higher in Finland, where education is somewhat more demanded when applying for jobs.

34 34 Well-being in form of work life and private life balance is equally important in both countries, according to my experience. There is very little literature available, when it comes to Swedish competence management and well-being, but in Finland Laakso-Manninen (2007) has published a study touching this subject from a competence advantage point of view. 4 OBJECTIVES AND GOALS The hypotheses in this study are based on the former analysis that has given indications to some assumptions and that is the starting point even in creating the objectives in this thesis. 4.1 Objectives of the thesis The objectives are formulated in the research questions that were already mentioned in the beginning. The research questions are based on following objectives: What does it mean to be strategic HR? Is HR seen as more operational or strategic function in the company today both by managers and HR? Is there a need to be more strategic? What are the most important tools for HR to become a business partner or to retain the role? How is HR strategy aligned with the company s business strategy?

35 35 Both the questionnaire and the personal interviews, will give both manager s and HR s view on these questions and hopefully will help the HR organization to get a picture of the current situation and tools to develop in to the wanted direction in the future. As a help in that they will have my analysis and development proposals based on the answers. 4.2 Goals The main goal with this study is to give Cygate s HR a reality check, both when it comes to the current situation based on answers both from themselves and the managers. There is also a goal of giving some development proposals based on the answers and the theoretical framework. I believe it is crucial for the company s future to guarantee that HR and the managers have the same view on HR delivery model as HR themselves. It is also important that the purpose of HR, both from strategic point of view and the company s needs is aligned. There is a turning point in many ways, when the HR team is quite new and the company is in transition in form of closer integration with the owner. There are also risks, such as higher amount of resigns than before, which makes it even more important to have common HR goals and actions with the managers in order to retain personnel. My personal goal is to give Cygate HR a canvas to work with. Something concrete to build a HR strategy and action plans on. I hope my findings will support that work and give some new ways of thinking going forward. I personally, won t be left in the company so this thesis is my heritage to the rest of the HR in a way.

36 36 5 DATA COLLECTION Data collection has conducted by using a survey and interviews. The survey was sent to all managers in Cygate, which is 49 persons and the interview was conducted with three persons who work within HR. The goal with the questionnaire was to try to support the way to find answers to the research questions below: What does it mean to be strategic HR? Is HR seen as more operational or strategic function in the company today both by managers and HR? Is there a need to be more strategic? What are the most important tools for HR to become a business partner or to retain the role? How is HR strategy aligned with the company s business strategy? 5.1 The survey-questionnaire The survey includes questionnaire included in the survey was given to all managers in Cygate, both line managers and their managers (the members of the board). To have better chances of getting answers back in fast phase, the questionnaire was handed to the managers during a manager meeting. The questionnaire was developed to gather quantitative data to examine the manager s view on HR and HR s role in the company as it is today. All questions apart from those gathering basic data will be linked to the questions provided in the HR interviews.

37 37 The questionnaires consist of a comparatively small number of questions with the goal that respondents can answer them in less than 20 minutes mostly because it is hard to get responses that are time-consuming from the managers. The opening questions were connected to the manager s years of experience both within Cygate and in working life in general. This gives another dimension to the analysis and can help to see if work experience and time in the company have any impact on how the managers see the importance of HR department. It was not possible to ask age or gender or department to guarantee anonymity. Items in the questionnaire will ask for responses to be either on a Likert scale (Strongly agree/disagree, agree/disagree and neither agree or disagree) or simple agree/disagree choices. This will accommodate the fact that some issues will require a more nuanced range of responses than others, and also partly provide variety so that respondents will be less inclined to slip into providing responses mechanistically without really considering the question. The questionnaires will also include some open questions that are connected to four yes/no questions. These questions were phrased in this way to encourage respondents to provide short answers. Connected to yes/no questions there were open questions, where the respondent could choose to answer more thoroughly, why he/she thought yes or no. Questionnaires were distributed to all managers, under cover of a letter giving a concise explanation of the purpose of the study. Each questionnaire was accompanied by an envelope and respondents were asked to give the answers back in sealed envelope to guarantee complete anonymity of responses.

38 38 Each respondent was instructed to return the completed questionnaire in an envelope addressed to the researcher, which will be distributed with the questionnaire. These envelopes were delivered to the researcher. The questionnaires did not request the name of the employee or any other personal information apart from their working life experience in years both within the company and outside Section I: Personal information In the first section of the questionnaire the managers are asked to tell how many years they have worked totally and how many years in Cygate. No questions about sex or age can be asked because there are so few women as managers and there are only a few younger managers so the confidentiality would disappear. Please indicate your work experience: YEARS (take the nearest year up or down, no months) 1. Years of experience within Cygate 8 years (average) 2. Total work experience 24 years (average) 3. Are you manager to any other managers? Yes 12 persons No 16 persons There were totally 49 managers, who received the questionnaire. 28 managers have given their answers. That gives answer percentage of 57. That makes the survey reliable and it is possible to draw conclusions. The answers consist of 43% managers to other managers (senior managers) and 57 % line managers. The answers are analyzed all together, but in some areas the difference